Sanchez Energy (SANC34) SWOT Analysis / TOWS Matrix / MBA Resources
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Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sanchez Energy (Brazil)
Based on various researches at Oak Spring University , Sanchez Energy is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy,
challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sanchez Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sanchez Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sanchez Energy operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Sanchez Energy can be done for the following purposes –
1. Strategic planning of Sanchez Energy
2. Improving business portfolio management of Sanchez Energy
3. Assessing feasibility of the new initiative in Brazil
4. Making a NA sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sanchez Energy
Strengths of Sanchez Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sanchez Energy are -
Strong track record of project management in the NA industry
– Sanchez Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Sanchez Energy is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the NA industry. The technology infrastructure of Brazil is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Sustainable margins compare to other players in NA industry
– Sanchez Energy has clearly differentiated products in the market place. This has enabled Sanchez Energy to fetch slight price premium compare to the competitors in the NA industry. The sustainable margins have also helped Sanchez Energy to invest into research and development (R&D) and innovation.
Innovation driven organization
– Sanchez Energy is one of the most innovative firm in NA sector.
Low bargaining power of suppliers
– Suppliers of Sanchez Energy in the NA sector have low bargaining power. Sanchez Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sanchez Energy to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Sanchez Energy comprises – understanding the underlying the factors in the NA industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Highly skilled collaborators
– Sanchez Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive NA industry. Secondly the value chain collaborators of Sanchez Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Sanchez Energy are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Ability to lead change in NA
– Sanchez Energy is one of the leading players in the NA industry in Brazil. Over the years it has not only transformed the business landscape in the NA industry in Brazil but also across the existing markets. The ability to lead change has enabled Sanchez Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Sanchez Energy has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Sanchez Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sanchez Energy has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Superior customer experience
– The customer experience strategy of Sanchez Energy in NA industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Sanchez Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sanchez Energy are -
Workers concerns about automation
– As automation is fast increasing in the NA industry, Sanchez Energy needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High bargaining power of channel partners in NA industry
– because of the regulatory requirements in Brazil, Sanchez Energy is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the NA industry.
Increasing silos among functional specialists
– The organizational structure of Sanchez Energy is dominated by functional specialists. It is not different from other players in the NA industry, but Sanchez Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sanchez Energy to focus more on services in the NA industry rather than just following the product oriented approach.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sanchez Energy supply chain. Even after few cautionary changes, Sanchez Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sanchez Energy vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Sanchez Energy has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High operating costs
– Compare to the competitors, Sanchez Energy has high operating costs in the NA industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sanchez Energy lucrative customers.
Interest costs
– Compare to the competition, Sanchez Energy has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As Sanchez Energy is one of the leading players in the NA industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the NA industry in last five years.
High dependence on Sanchez Energy ‘s star products
– The top 2 products and services of Sanchez Energy still accounts for major business revenue. This dependence on star products in NA industry has resulted into insufficient focus on developing new products, even though Sanchez Energy has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Sanchez Energy has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the NA industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at Sanchez Energy, in the dynamic environment of NA industry it has struggled to respond to the nimble upstart competition. Sanchez Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Sanchez Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sanchez Energy are -
Loyalty marketing
– Sanchez Energy has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Buying journey improvements
– Sanchez Energy can improve the customer journey of consumers in the NA industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sanchez Energy is facing challenges because of the dominance of functional experts in the organization. Sanchez Energy can utilize new technology in the field of NA industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sanchez Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Sanchez Energy can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the NA industry.
Manufacturing automation
– Sanchez Energy can use the latest technology developments to improve its manufacturing and designing process in NA sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sanchez Energy can use these opportunities to build new business models that can help the communities that Sanchez Energy operates in. Secondly it can use opportunities from government spending in NA sector.
Leveraging digital technologies
– Sanchez Energy can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sanchez Energy can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions in NA industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sanchez Energy in the NA industry. Now Sanchez Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Sanchez Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in NA sector. This continuous investment in analytics has enabled Sanchez Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sanchez Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Sanchez Energy can develop new processes and procedures in NA industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sanchez Energy can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Sanchez Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Sanchez Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sanchez Energy are -
Regulatory challenges
– Sanchez Energy needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the NA industry regulations.
Easy access to finance
– Easy access to finance in NA industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sanchez Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Sanchez Energy in the NA sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to NA industry are lowering. It can presents Sanchez Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the NA sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sanchez Energy.
High dependence on third party suppliers
– Sanchez Energy high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Sanchez Energy needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sanchez Energy can take advantage of this fund but it will also bring new competitors in the NA industry.
Stagnating economy with rate increase
– Sanchez Energy can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the NA industry.
Shortening product life cycle
– it is one of the major threat that Sanchez Energy is facing in NA sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Sanchez Energy will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sanchez Energy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of NA sector.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Sanchez Energy business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Sanchez Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sanchez Energy needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Sanchez Energy is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Sanchez Energy is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Sanchez Energy to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Sanchez Energy needs to make to build a sustainable competitive advantage.
